FPIs turn net sellers in January 2023

The start has not been too good for the Foreign portfolio investors (FPIs) in the month of January 2023. FPIs turned into net sellers in the first week of 2023 largely due to the hawkishness of the FOMC, which resulted in bearish sentiments in the market. IT stocks and financials came in for a bout of FPI selling in the first week. FPIs also appeared to be selling in IT stocks ahead of the results season expecting pressure on the top line and the bottom line. For the week ended January 6th, FPIs outflow from Indian equities stood at Rs. 5,872 crore. That is not all. While FPIs sold Rs. 5,872 crore from equities, they also sold Rs. 1,240 crore in debt and Rs. 760 crore from VRR debt; apart from a smaller bout of hybrid selling.

In sum, the outflow stood at Rs. 7,908 crore in the first week of 2023. Friday was a day of big selling as FPIs pulled out Rs. 2,903 crore. There is something like the Friday effect playing out since FPIs are aggressively selling on Friday each week. In fact, if you take a slightly broader time frame, the FPIs were net sellers for 11 consecutive days and during this period, they cumulatively sold stocks worth Rs. 14,300 crores. What is more interesting is that while these FPIs are selling in India, they are infusing money into the underperformers of the previous year i.e. China and Europe. FII money is chasing lower valuations by selling in overvalued markets like India and buying into relatively undervalued markets.

As of now, the selling is the short term trend. In 2022, FPIs bought in capital goods, FMCG, and financial services and other consumer facing services. However, they were aggressive sellers in IT and oil & Gas. FPIs had sold stocks worth Rs1.21 trillion in FY22, but this included selling of Rs. 2.25 trillion in the first half of the year and buying of close Rs0.96 trillion in the second half of the year. January may have started on a negative not but these are still early days. Once the Fed hawkishness stops out, things could change for the better.